When Bill Stasek Chevrolet in Wheeling, Ill., a Chicago suburb, began experimenting with a salary pay plan for its sales staff in 1997, senior salesman Jim Hauser switched from commission pay to a salary of nearly $7,000 a month. He was the highest-paid salesperson at the dealership.
Hauser admits he had trouble being motivated to keep his sales high.
'Production fell off for me and others,' he says. 'There were times when I might not take that last sales call. It has to do with the mindset of the salesperson. The carrot on a stick always makes you perform better.'
Management also had some misgivings along the way.
'This made management feel they could demand that you perform,' Hauser says. 'After all, they were paying you. If you sold 20 cars, no problem. If you didn't, they were mad at you. Nothing about this felt right.'
Bill Stasek says he was so concerned about retaining good staff that he initially paid salespeople too much.
'The first year was painful,' recalls Stasek, 53, the dealer principal.
As a result, Hauser helped his boss redesign the plan into an arrangement that they hoped linked the best of a salary plan with incentives. After several modifications, Stasek says the plan is meeting his initial goals.
The idea was that by guaranteeing salespeople a decent salary, they could focus on the customer's best interests, whether the person was looking for a Cavalier, with a low gross profit for the dealer, or a high-end Suburban.
The long-term goal was to recruit and retain good staff with an eye on building repeat business.
'We really wanted to create an environment that was healthy for the customers, salespeople and the rest of us,' Stasek says. 'We wanted to run our business better and spend less time putting out fires. Commissions have their place, but they create a lot of problems. When sales are down, people look for greener pastures. When you have tough times, salary plans look pretty good.'
Both Stasek and Hauser believe that a straight salary plan has a better chance of working in a less competitive environment. Stasek Chevrolet competes with seven other Chevy dealerships within seven miles and hundreds of others in the metro area.
Stasek initiated the plan with the advice of an automotive consultant, but the plan has been modified.
One of the first discoveries was that a straight salary plan wasn't working in the used-car sales department. The dealership switched from a salary range of $2,000 a month to $4,500 a month to a base salary of $1,200 a month and a commission of 25 percent of the gross profit for each vehicle. 'Selling used cars is different than new,' Stasek says. 'You can find a new car anywhere, but each used car stands on its own without the intense competitive price, giving salespeople a greater opportunity to make a respectable commission.'
The new-car sales pay plan has evolved differently. At the start, the salaries were relatively high to account for the loss of commissions.
They ranged from $2,000 to $7,000 a month, with the majority in the $2,000 to $4,000 range.
Salaries have been scaled back to $1,200 to $3,000, and salespeople earn a monthly bonus based on the average gross profit of the vehicles they sell and on customer satisfaction.
In the first half of 2000, the dealership instituted a minimum quota of eight sales a month. Salaries of those missing the quota are scaled back to $1,200 until the salesperson raises sales back to the minimum.
The average new-vehicle salesperson now earns $45,000 to $60,000 a year, including an average monthly bonus of $2,000 to $2,500.
Stasek considers the program a work in progress and a labor of love.
'We had to work our way back from a high salary and increase the bonus without abandoning the essence of what we were trying to do,' he says. 'We have built a good core of salespeople who have been here in excess of five years, and we have never had that before.'
Adds Hauser: 'There has to be an incentive. You have to give people something to shoot for. Otherwise, you take the fun out of it. Going from the mentality of you either sell cars or starve to getting all the money up front was a difficult transition. But when we married the two, it worked for us.'